Joint venture: Beijing Foton Cummins Engine Company Ltd.

Beijing Foton Cummins Engine Company Ltd. is a commercial vehicle company jointly established by China’s Beiqi Foton Motor Co., Ltd. and Cummins Inc. from the United States with a 50/50 division of shares. The company has a registered capital of 1.08 billion CNY and its Beijing production facilities cover an area of more than 170,000 square meters in, which makes it one of the largest production plants in China. The company is engaged in designing and production of diesel engines (2.8l and 3.8l) and of Euro IV emission standards compliant engine components. The plant has a heavy focus on automation and high-tech production tools foe which it has been noted in the World Economic Forum’s Global Lighthouse Network.

Cummins Inc., a globally significant power technology company

Cummins (China) Investment Co., Ltd., the Chinese investment vehicle under Cummins Inc., owns 40% of the shares of Beijing Foton Cummins Engine Company Ltd. Furthermore, an additional 10% is owned by Cummins Inc. directly, resulting in an equal 50/50 division between the United States and China.

Cummins Inc. is a global leader in the field of power technology. It designs and manufactures power generation products, engines, fuel systems and other similar products on a multinational scale. The company sells in more than 190 countries worldwide. Cummins Inc. was one of the first foreign corporations to enter China in 1975. It established Beijing Foton Cummins Engine Company Ltd. in 2006. It has been expanding ever since, founding multiple joint ventures with Chinese manufacturers. Among them, for example, Dongfeng Automobile company and a JV with LiuGong (Guangxi LiuGong Machinery Co., Ltd.,).

Recently, Cummins Inc. and Sinopec Group jointly established Cummins Enze, which will contribute to the development of green hydrogen power, especially in China. Cummins plans to take a leading role in China’s green transformation.

Therefore, China has emerged as one of Cummins’ most rapidly growing geographical markets as it has invested massively in enterprises and business partners. With more than 50 facilities and manufacturing sites in China, it is undisputedly a leading foreign investor in China’s diesel engine sector.

The Chinese counterpart is Beiqi Foton Motor Co., Ltd, owning the other 50% of the shares in the joint venture. The business scope of Foton covers the development and manufacture of commercial vehicles, ranging from sport utility vehicles, buses, vans and trucks to construction vehicles. Beiqi Foton counts as the one of the largest commercial vehicle companies in China, but is also active on the international level.

The major shareholder of Beiqi Foton Motor Co, Ltd. (with 27.46% of shares) is Beijing Automotive Group Co Ltd (BAIC), an enterprise directly under the State-owned Assets Supervision and Administration Commission (SASAC). BAIC is the sixth-largest car manufacturer in China. Its main subsidiaries include passenger car manufacturer BAIC Motor (with a 44.98% share); military vehicle manufacturer BAW; and Foton Motor. Most of BAIC’s turnover is generated by agricultural, commercial and military vehicles. Datenna’s research found a risk of Beiqi Foton Motor having potential links to China’s defence industry.

Another noteworthy shareholder of Beiqi Foton is Weichai Power Co., Ltd., a diesel engine producer, with a 1.22% share. Weichai is among the top 500 companies in terms of revenue in China, being a “multi-field and multi-industry international group”.

The Made in China 2025 (MIC2025) strategy aims to transform China into a leading advanced manufacturing power, with certain fields labelled as key or pillar industries. Equipment, manufacturing, electronics, as well as automobiles and engines are included, and these have become central for China’s effort to reduce dependence on foreign countries and imported technologies. By emphasizing development within these specific industries, China is also promoting its manufacturers globally.

China aims to maintain its position as a strategic key player in the commercial vehicle and engine industries. As a result, most companies within these industries remain directly or indirectly controlled by state-owned enterprises, as is the case with Beiqi Foton Motor, along with continuing to invest heavily in new infrastructure to meet digital and environmental standards.

Owing to this strategy, the joint venture, Beijing Foton Cummins Engine Company, has benefited significantly. The company is rapidly developing into a major key player in the engines sector as well as green power. Their development enables the company to expand massively throughout China.

United States companies are contributing indirectly to one of the pillar sectors of China’s MIC2025 strategy through the JVs such as this by investing in China and cooperating with Foton Motor. This case is a clear example of how such cooperation between a foreign and a Chinese entity can build a large, successful business, in the process serving the industrial goals of China. However, this sector is also tied to China’s Military Civil Fusion strategy, meaning the technologies and components developed can have both civil and military applications. For this joint venture we see the risk to be relatively low as the Chinese entities have few potential applications for China’s defence industry. Besides, the Chinese state’s indirect involvement in this joint venture through multiple layers of ownership also carries a relatively low risk of a strategic government interest in the technologies produced by the joint venture. This case still concludes that the need to be thoroughly informed about potential JV partners the business activities they are involved in.